By demanding an apology for Morey's tweet and canceling several lucrative deals with the Rockets, China may have gone too far in its efforts to control the messaging of foreign firms. It has in the past targeted firms as varied as Gap, Marriott, and United Airlines for failing to respect domestic political sensitivities.

The danger for China and for US-China economic ties more broadly is that organizations finding themselves in the same situation may have to juggle not only Chinese but also American values when considering their operations in China.

US attitudes toward China are changing, with more questions being asked about the compromises made to maintain access to the country's huge market. President Trump's hard line on trade is the culmination of years of mounting frustration with the uneven playing field for foreign firms operating in China. Democrats and Republicans in Congress have found common cause in support for Hong Kong, Taiwan, and Xinjiang, and continued press coverage of the demands of Hong Kong protestors for greater freedoms have captured the attention of the public.

At the same time, China under President Xi Jinping has grown increasingly intolerant of internal dissent and external criticism. Authorities respond aggressively to any perceived threats to the Communist Party's legitimacy or the country's sovereignty. They say that tensions in Hong Kong (and Taiwan and Xinjiang) are internal matters that foreigners have no business commenting on.

Beijing has also taken pains to inflame nationalist sentiment to bolster popular support for its policies, and many of the violations of domestic norms by foreign companies are called out first by members of the public in online forums.

Moreover, China is increasingly positioning itself in opposition to the US on the global stage. Whereas the US has traditionally championed free enterprise and universal human rights, China defends its state-driven brand of capitalism and non-interference in the domestic affairs of other countries. It wants its system recognized as an equal to that of the US and has been projecting its economic power outward—for example, through the Belt and Road Initiative—to achieve this aim.

The US and China also agreed to continue discussion on more structural issues at the root of the conflict such as forced technology transfer by foreign firms operating in China, subsidies given to domestic firms, and state-directed industrial policies. But it won't be easy for either side to make substantive compromises given the hardening of public opinion in both countries.

Getting tough on China is a rare area of bipartisan consensus today in US politics, whereas a Chinese belief that the US is trying to contain China's rise with new rules on trade is fueling nationalist sentiment.
Further decoupling of the two countries' economies seems inevitable, with companies increasingly being forced to choose between one value system and another.

NOW WATCH

LOUD WORLD. CLEAR SIGNAL. Signal is a newsletter on international affairs produced by GZERO Media four times a week. No jargon, no nonsense, no noise. Signal is a product of GZERO Media, a Eurasia Group company.

I have read, understand and consent to the Privacy Policy and Terms of Use, including the transfer of my personal data to the United States from my country of residence (if different).

Kelsey Broderick supports the Asia practice's work on a wide variety of issues and countries, with a particular emphasis on China. Prior to joining Eurasia Group, she researched macroeconomic developments and trends in China at the World Bank.

We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. This website uses cookies. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence (if different), and our use of cookies as described in our Cookie Policy.